Quality-control gauges used for measuring and checking during manufacture fall within inputs and remain exempt under the notification.

Gauges and valve checking plates used only for measuring and checking finished goods during manufacture were treated as inputs under Notification No. 217/86. Their use was held distinct from producing or processing goods, or from bringing about any change in a substance, so they did not fall within the exclusion in Explanation (i) for machines, equipment, tools or appliances used in manufacturing operations. The cited Supreme Court ruling was considered inapposite because it addressed material handling rather than quality-control measuring devices. The exemption therefore remained available to such measuring and checking equipment.

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Issues: Whether gauges and valve checking plates used for measuring and checking during manufacture were covered by the expression "inputs" under Notification No. 217/86 dated 2-4-1986, or were excluded by Explanation (i) as machines, equipment, tools or appliances used for producing or processing goods or for bringing about any change in any substance in relation to manufacture.

Analysis: The goods were used only for measuring and checking finished goods during the manufacturing process. Such activity was held to be distinct from producing or processing goods or from bringing about any change in any substance. The exclusion in Explanation (i) applied only to machines, machinery, plant, equipment, apparatus, tools or appliances used in the actual producing or processing of goods, and not to measuring or checking devices used for quality control. The reliance on the cited Supreme Court decision was found inapposite because it dealt with material handling operations, not with measuring and checking of finished products.

Conclusion: The goods were not excluded from the meaning of "inputs" under the notification and the exemption remained available to them.

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